Wall Street titans turn on Trump; US sentiment falls as prices rise; iron ore price drops; China resists US pressure; Australian sentiment retreats; UST 10yr at 4.25%; gold up and oil down; NZ$1 = 55.5 USc; TWI = 65.6

The belief that money is a store of wealth

was always going to be lost at some point. 

But you'll know it's really serious

when there's a tariff on bogroll. 

Said it before to say it again when the electorate had been promised that “things” were going to be better for them but instead turn out to be worse, and quickly so, then all the American propensity for conspiracy and betrayal will come to the boil en masse. 

That's not just a great post, it's a fantastic post. 

Will be interesting to watch those who need to fiercely blame Trump, so as to preserve their (restricted) worldviews. 

I agree - I don’t disagree with what the Trump administration are doing as the path they were on was one of self destruction (ie they were going to bankrupt themselves unless they changed course). But not many people want to experience short term pain in or to create longer term sustainable/prosperity - those that were benefitting the most from the US bankrupting themselves are the ones now complaining the most. 

 

Here’s a good chart of US deficit spending as % of GDP:

https://fred.stlouisfed.org/series/FYFSGDA188S

We’ve been living in a period of wartime like deficit spending eg recent deficit is 6% of GDP! They need to at least cut this in half to avoid future national debt/interest expense issues. 

 

As for the tariffs, if we can return manufacturing back to domestic western economies it’s going to be great for younger people - jobs galore! But then it will expose how overpriced our houses are relative to our productivity because the cost of our goods will be very expensive compared to cheap foreign labour (eg Asia) which will likely see inflation rise and interest rates to follow - forcing house prices down further. Importing cheap foreign goods in recent decades has resulted in low inflation/disinflation meaning RBNZ could keep rates artificially low and resulted in very high house prices relative to incomes. That process could now reverse itself over the coming years/decades. 

Well said Averageman

The financial cold-war that the U$ was already fighting against China, has now been extended full on by #47 to the EU as well, and more specifically against Germany because it is the engine room of the EU economy.

Throw a spanner in the works there, and that is an existential challenge for the entire union - one that was already on death's row anyway - this will speed up the inevitable unless the EU can extract itself from its habit of following explicit instructions from the U$A for them to commit industrial/financial hare kare.

It should require only simple maths to know that a country that runs a huge trade surplus cannot win a one-on-one tariff war against a trading partner that runs corresponding deficits - particularly if that country has significant reserve currency status along with a belligerent hegemonic mindset. Surely a different approach is required.  

As long as the RoW continues to buy the hegemon's debt, the U$ can export their problems, and kick the twin deficit (trade and Federal fiscal deficits) tin can down the road, whilst the public debt to GDP ratio races from 137% towards 200% in a drawn-out inevitable socio-economic trainwreck that only creates more total carnage.

There doesn't appear to be any hope for the EU, given their idiotic appointed EC executive's desire to blow some $800 billion on armaments, to guard themselves from an enemy that only exists in their minds. If they are dumb enough to do that, then there is ZERO hope for financial success.

The EU has spent nil net investment on their future for more than a decade - surely it would be a no-brainer to reinvent their model - one of huge net exports of goods to deficit countries like the U$. Trump's explicit policy is to wreck their economies with his tariff bludgeon.



Surely the EU countries need investment in the industries and technologies that it has lagged in - $800 billion would go a long way to addressing this problem, as well as lifting money velocity and creating jobs that directly help to create a sustainable economic future. 



China has many options as it is a significant creditor nation at $2.9 trillion - in 3rd place behind Japan and Germany, both on $3.3 trillion - according to the World Population Review figures from 2023.



These countries have a mountain of capital to use to their advantage in Orange Man's trade/tariff war. Needless to say, the U$ languishes dead last in this list on a mind-numbing $-19.9 trillion.



China is in a prime position to fight this cold war and has already done the hard yards in infrastructural investment that makes it an efficient productive economy.



They could easily develop their consumer market to soak up more of their production, and along with diverting goods to other countries that are not trying to bludgeon them to death, they could weather the storm of cutting out the U$ as a trading partner altogether, if they persist with their cold war isolationist mentality.



U$ exports only account for 15% of their total trade anyway. If the above scenario happened, the big loser would be the U$ consumer, the country's industrial redevelopment, plus of course their supply lines, and essential raw materials. 



China could introduce a minimum basic wage that would give every citizen in the country a decent standard of living and help to develop their consumer economy at the same time.



More than a year ago I wrote a piece on how basic income payments can not only enrich the entire nation but also eliminate the potential welfare trap as well.



https://globalsouth.co/2024/02/09/solutions-to-the-western-train-wreck/



...quote...



"In existing models, including within New Zealand and the U$, when someone gets a job, they usually lose some or all of their existing benefits – as such this disincentives them from finding a job. Basic income models are the polar opposite – they incentivise beneficiaries to work.



The basic income model also encourages new business start-ups by allowing them the wherewithal and the confidence to try to establish a business that they may have always dreamed of."



Meanwhile, the God-king is steadfastly holding course with massive deficit spending (likely 7-8%) along with planned blatant tax cuts that will benefit his dancing billionaire club at the expense of Mainstreet. The voters are slowly waking up to the fact that they have elected a president who is only going to increase the financialisation of an already terminally ill economy.



For the U$ economy, the 2024 POTUS elections were tantamount to a death row prisoner facing execution the following morning - he is asked which calibre of rifle he would prefer the firing squad to use.



Regards to all

Col   

104% tariff on all Chinese imports starting straightaway. Does that not mean a US importer with a shipment  set to arrive worth say US$100,000 will need to stump it to the US government US$104,000.00 in order to clear it? Cannot imagine that sort of dosh floating around especially if the importer is purely an agent operating on a consignment basis. If ports can’t clear arriving cargo then they eventually stop incoming shipments. At that point tariffs become virtual  embargoes.